California lawmakers created a new set of state powers to blunt sudden, severe spikes in gasoline prices, but those tools remain largely unused as global oil prices surge and drivers feel the impact at the pump. The law signed by Gov. Gavin Newsom in 2023 would give regulators the ability to cap refinery profits and penalize price gouging, according to the policy described by backers at the time. Yet the rules have never been applied, and the California Energy Commission voted last year to delay them for five years, setting up a renewed test as gasoline prices rise again amid the Iran war.
The delay has drawn attention because the 2023 statute was passed in the context of rising gasoline costs and a concern that oil companies could benefit during market disruptions. Then-Sen. Nancy Skinner, who authored the law in the Legislature, called it a “landmark law” that would “allow us to hold oil companies accountable if they pad their profits at the expense of hard-working families,” and Newsom later said, “California took on Big Oil and won.” But the policy’s core mechanism never moved into active enforcement.
According to the AP report, when the California Energy Commission met in late August and considered whether to advance the profit-cap rules, Newsom was already retreating from a more aggressive approach toward the oil industry. The commission’s vote on Aug. 29 delayed the refinery-profit rules for five years. Ahead of the vote, the vice chair of the commission, Siva Gunda, said the delay would help boost “investor confidence” in the state’s refiners and thereby ensure “a reliable in-state refining capacity.”
Consumer advocates and others who pressed for the law say the moment of highest consumer impact is exactly when regulators should use the powers. Jamie Court, president of Consumer Watchdog, said the timing for enforcement matters because “These are the moments we need them, because when the price of a commodity goes through the roof — be it crude oil or refined gasoline — that’s when companies make outrageous profits.” Kassie Siegel, director of the Climate Law Institute at the Center for Biological Diversity, argued that the state’s experience shows Californians face a market shaped by a limited number of refiners, saying, “What that information shows is that Californians are at the mercy of a very few refiners with immense power.”
The dispute reflects a broader transition challenge in California’s energy system. The state has pledged to phase out fossil fuels by 2045, but it still depends heavily on gasoline produced by refineries that are increasingly at risk of closure. Phillips 66 shut a Los Angeles refinery, citing concerns about the sustainability of the California market, and Valero planned to close its Benicia refinery next month. Economists and officials said those closures limit the state’s ability to respond quickly to supply problems without importing more fuels from outside.
The report says the state’s energy regulators and leaders have warned of the consequences of hitting refiners with profit caps during shortages. Severin Borenstein, a UC Berkeley energy economist, questioned the approach, warning that capping refinery profits during shortages could backfire. “The last thing we need is to start trying to regulate refinery margins,” Borenstein said, adding, “As much as people don’t like high gasoline prices, they really, really hate gas lines.”
Commissioners also tied the decision to a supply-and-competition challenge that makes California a “captive market” for regional refining. Zachary Leary, a lobbyist for the Western States Petroleum Association, argued that the problem is structural and that California is an “energy island,” saying the state is losing 17% of its refining capacity. In contrast, Court said the governor left California without the “hammer” it needs when prices spike, characterizing the decision as a “panic” response.
The renewed scrutiny also comes as analysts connect the current jump in gasoline prices to a global oil shock linked to the war with Iran, rather than a change unique to California. Borenstein said crude oil’s benchmark climbed more than $25 a barrel since the conflict began and that the shift typically translates to about 60 cents per gallon at the pump, in line with increases in retail prices. Ryan Cummings, chief of staff at the Stanford Institute for Economic Policymaking, said the state is more vulnerable because the loss of refineries increases how hard global disruptions land in California.
Cummings pointed to the Strait of Hormuz as a key concern for global supply, noting that before the conflict the narrow waterway carried more than 20 million barrels of oil a day, roughly one-fifth of global supply. He said traffic was at a standstill and that crude prices topped $100 a barrel again, and he described a worst-case scenario in which crude prices could rise above $130 or $140 per barrel for longer periods, driving gasoline prices toward $7 and potentially approaching $10 at some stations. Cummings said, “Right now, this doesn’t appear likely, but it is a worst-case scenario that is growing by the day.”
As for what comes next, advocates argued California should immediately implement the profit-cap rules and require companies to hold larger fuel inventories. Siegel said leaders should not delay, arguing, “Our leaders shouldn’t rest until the rules are in place to prevent price gouging on top of volatility, and should not rest until people get their money back.” But economists said the state’s biggest challenge may be infrastructure—particularly whether it can offset refinery losses with imports and fuel logistics. Valero’s Benicia refinery, which produces about 10% of the state’s gasoline, was cited as an example of capacity that would be removed next month, raising questions about how gasoline will arrive after closure.
The report describes competing proposals that remain unfinished. One idea is to convert the Benicia site into an import terminal, and Newsom said in January his administration was working with the company to continue importing gasoline into Northern California after refinery operations end. Another proposal, highlighted by Court, is a pipeline called the Western Gateway Pipeline that would bring refined gasoline from Midwest refineries into the state; the concept would build a new pipeline and reverse an existing one to move gasoline and diesel from central U.S. refineries to Arizona and California. The report also notes that a state lawmaker proposed expanding access to E85, a cheaper ethanol blend, though timelines remained unclear.
For now, the profit-cap rules remain on hold until 2029, leaving California to navigate the next phase of the transition without the enforcement mechanism critics say was meant for exactly this kind of market stress. By then, the state may have lost more refineries, extending the pressure described by officials and experts—while drivers continue to face the reality of gasoline shocks in what the report characterizes as one of the country’s most unaffordable markets.